'Resources Are Weapons' Protecting Mineral Resource Pipelines with Financial Strategies

Glencore Nickel Production Facility.

[Asia Economy Reporter Park Soyeon] The Export-Import Bank of Korea (KEXIM) has been preparing financial support for Glencore since last year. The aim is to minimize the domestic industrial shockwave caused by the surge in prices of essential industrial raw materials. If KEXIM's 'love call' strategy toward Glencore succeeds, domestic companies are expected to secure a stable mineral resource supply chain based on the national policy bank's financial power.

◇ 'Resources as Weapons' - Minimizing the Shock to Korea's All-Around Industries such as Secondary Batteries and Electric Vehicles = Recently, the government and industry have prioritized securing long-term stable supply of key minerals at stable prices. Failure to negotiate raw material prices in core sectors like secondary batteries could lead to cost increases being reflected in product prices, causing a sharp decline in competitiveness. Beyond that, disruptions in the supply chain could lead to the worst-case scenario of production halts. This affects not only batteries but the entire industrial sector including electric vehicles. Particularly problematic recently is cobalt, whose price has skyrocketed. Cobalt is a major raw material for cathode materials, which account for the largest cost in manufacturing electric vehicle batteries. The International Energy Agency (IEA) forecasts that cobalt demand will increase about 20 times by 2040 compared to current levels. Some analyses suggest that cobalt demand will surpass supply within the next 3 to 4 years. Chinese companies, moving swiftly, have preemptively entered the Democratic Republic of Congo, which accounts for about 70% of global cobalt production, and have taken control of nearly half of the country's cobalt output. Industry insiders worry that China, advancing its high-tech industry ambitions, may weaponize cobalt as a resource.

◇ KEXIM's Financial Resources and Network Supporting Korean Industries = The reason KEXIM is trying to conduct a direct loan to Glencore is precisely because of cobalt. Glencore is the world's largest cobalt supplier, handling one-third of the global cobalt supply alone. KEXIM is thoroughly preparing to offer strong subscription incentives to Glencore based on its financial strength. What KEXIM expects through this is that Glencore will provide long-term and stable resource supply to Korean companies. This is not the first time KEXIM has actively pursued securing resource supply chains for Korean industries. At the end of last year, KEXIM signed a contract to provide financial support of $150 million to Trafigura, one of the world's top three resource trading companies based in Singapore. In return for KEXIM's financial support, Trafigura promised stable mineral resource supply to Korean companies. This company supplies copper, aluminum, nickel, and more to Korean firms. Going forward, KEXIM plans to continuously discover additional financial support programs to diversify industrial resource supply chains so that if one supply route is blocked, resources can be supplied through alternative channels. An industry insider said, "Glencore is one of the largest resource development companies with annual sales of $200 billion. If KEXIM steps in, it could open up breathing room for Korean companies to secure resources."

This content was produced with the assistance of AI translation services.